Delusionary Zoning

My adopted home town, Amherst, Massachusetts, has the habit of focusing on a pressing and complicated problem and making it just a bit worse. One current example is the proposal to increase the amount of affordable housing in the town by making houses even more expensive to build, an effort that brings to mind a political quote from some years ago. During one of the quotidian crises in Northern Ireland’s peace process, I recall Ian Paisley, Jr., (son of the famous Reverend Ian Paisley, Sr.) saying something that must have made père Paisley’s shoulders sag and eyes roll.

“We are standing and looking into the abyss,” declared Paisley junior, “so we must all move forward together.”

Although a doctor of divinity rather than of physics or medicine, Rev. Ian Paisley, Sr., would have understood that when standing at the edge of an abyss, the unforgiving law of gravity renders it better for your health to move backward rather than forward.

By the way, after a cursory online search I have unearthed no evidence that Ian Paisley, Jr., ever said any such thing. The possibility that I fabricated the quote to serve my purposes should cast no doubt on its veracity, however. This approach to truth is good enough for Neil deGrasse Tyson — a top scientist with his own TV show — so it should be good enough for me, a small-town New England attorney with no scientific qualifications and no TV show.

Returning to the situation that brought Paisley’s alleged (by me) quote to mind, a number of townsfolk wish to amend Amherst’s zoning bylaw, namely Article 15. This provision is titled “Inclusionary Zoning” rather in the way the governmental agency responsible for shortages in Orwell’s 1984 was called the Ministry of Plenty. Currently the Inclusionary Zoning bylaw requires that if you build 10-14 new homes — note that adjective — at least one of them must be “affordable,” a term that the bylaw defines, if that is not too generous a verb, in the manner that I present later in this post.* Said affordable units must be “comparable to market rate units in terms of quality of their design, materials, and general appearance of their architecture and landscape.”

The proponents of the amendment would like to (1) mandate that in any project involving ten or more new units the proportion of affordable units shall be ten per cent; (2) ensure that the affordable units are equivalent to, not merely comparable to, the market rate units in terms of quality, style, and number of bedrooms; and (3) re-define the word “new” so that it includes not new. That last item, which deserves an entry in the next edition of the Dictionary of Newspeak, says that “new dwelling units” shall include: “Substantial renovation of 10 or more dwelling units in existing buildings, where renovation involves the material replacement of 50 percent or more of the interior of affected units, including but not limited to the removal or relocation of walls.” Old dwelling units, in other words.

So if you own a building that contains ten market-rate units and you decide to invest money in renovating them, from now on one of them will have to be “affordable,” i.e. generate less money for you. Assuming you are a rational economic actor, what are your options? Either refrain from renovating, or renovate away and then increase the price of the other nine units to make up for the cost of the “affordable” one.

If you are wondering why the bylaw needs amending, I should make clear that the reason is not because the current version is working like a charm, with new affordable units popping up all over the place like smoke shops. Amherst is hardly awash in affordable housing. No, the proposed amendment arises from the failure of the current version to encourage the construction of affordable homes. Why an “Inclusionary Zoning” bylaw should have failed in this way is not hard to work out.

Raising the price of a product tends to deter people from purchasing it. Taxing tobacco is supposed to deter smoking, for example. And taxing carbon will deter fossil-fuel use, supposedly. Harvard economist Lawrence Summers says so, and as a former economic adviser to President Obama he must know what he’s talking about (ahem). With consumer products a concept known as the price elasticity of demand comes into play, and it refers to how much, if at all, a change in a product’s price will cause a change in demand. Here, however, we are considering supply. So how much will a change in the price of house-building affect the supply of houses?

If Amherst’s results to date do not provide sufficient data for you, please consider Washington, D.C., whose experience suggests that the supply will fall. After six years of the “inclusionary zoning” policy, the number of low-income units built in Washington stood at two. Not two thousand or even two hundred. Just two. According to this report from the Center for Housing Policy, in suburban Boston 43% of the communities with “inclusionary zoning” could point to no new units at all, while more than 33% could not say how many, if any, had been built.

But as in our nation’s capital, the advocates in Massachusetts respond to the failure of the old policy by demanding more of the same; much more. The old Soviet commissars in charge of pig-iron production would have approached this problem in a similar manner. If the inmates of the Workers Paradise fell short of the target announced in the Five Year Plan, the apparatchiks would simply raise the goal. You couldn’t produce 10 million tons of pig iron? How does 17 million tons sound?

Ignorance is strength. Unaffordable means affordable. New means not new

The happy difference, of course, is that if home-builders do not meet the production targets set by the commissars in Amherst’s Ministry of Plenty, they do not go to the gulag; they just go to Hadley, crossing an invisible,unpatrolled border devoid of mine-fields and watch-towers.

Article 15 is the equivalent of a tax on new homes. There are several words for this sort of zoning, but “inclusionary” is not one of them. “Delusionary” would be more accurate.

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* What does “affordable” mean? In Amherst, the answer depends on the buyer, not the unit. Article 12.24 of the Zoning Bylaw states:

“Affordable housing units are units which may be rented or purchased by those who meet the guidelines for maximum annual income for low-income or moderate-income family or household. The income limit for low-income shall be 80% of the median income for Amherst and the income limit for moderate-income shall be 120% of median income for Amherst.”

In other words, a unit is “affordable” within the meaning of the bylaw if the purchaser meets the income guidelines. If an income- qualified buyer finds a lender with a high tolerance for risk, e.g. one whose dodgy loans will be covered by the taxpayer, that buyer may purchase a market-rate unit which, ta-da, becomes “affordable.” Let us go forward together and make a list of all the ways this could go wrong.

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